How To Cut Tied Pub Rents

30 Oct 2013

GMB and 9 other organisations in the ‘Fair Deal for Your Local Campaign’ has set out for Vince Cable, Secretary of State and Jo Swinson, Minister for Consumer Affairs at the Department of Business, Innovation and Skills Department (BIS) exactly how the ‘market rent only’ option in the proposed statutory code to deal with pubco overcharging would work in practice.

BIS has promised that Parliament will legislate a “market rent only” option with tenants able to buy products on the open market and pay a fair rent for the building. The aim is to lower sky high rents charged by pubcos. The Government’s verdict should be available soon following the widespread consultation on the draft statutory code over the summer.

The letter explains that it is not only the only clear solution, but is also a moderate, gradual solution that as well as leading to a fairer split of pub profits, would also allow the pubcos time to adjust their model, as it would come in practice over a number of years. The letter defines and details the market rent only option in practice setting out the process and the clauses that would be added to leases. This has not been done before, including by BIS officials who it seems may have been misunderstanding how the concept would be introduced and how it would work.  The letter sets out in detail exactly how the market rent only option (the solution proposed by the BIS Select Committee) would work in practice, activated at various ‘trigger’ events, including rent review, lease renewal, a significant alteration to the price of products and the sale of a pub. (The latter would insure that developers and others cannot exploit tied terms to evict a licensee, which is something that has proved a problem – which is why a market rent only option would also protect more pubs from closure by providing greater protection from development/change of use as well as increased profit to the pub business).

What this means is that the provision of a market rent only option, as well as being the only clear solution to the serious problem of pub owning companies overcharging tenants through high rents and beer prices, is also a moderate, gradual solution that would be brought in over a number of years. This means that the large pub owning companies will be able to change their business model – and crucially that they would then have to offer attractive, fair tied options to persuade their tenants to carry on buying beer through them – which as well as stamping out the current overcharging would also allow the large companies to adapt. Ironically, the market rent only option would also be the only option that would make ‘the tie’ work as it should. With the market rent only option available to licensees at rent review, renewal or another ‘trigger – the pubcos would offer attractive, fair tied options where rent really is lower and that included genuine partnership. The letter also points out that the market rent only option means that the Adjudicator is only required to oversee breaches of the market rent only process, not to try to decide rental levels. So the market rent only option would be simple, effective and cheap – unlike expecting the Adjudicator to decide on rent levels without this being in place.

Steve Kemp, GMB National Office, said “GMB members working in the pub industry are relying on the right decision to be made by Government. The free of tie “market rent only” option is a simple, moderate and gradual way to a fair split of pub profits. A decision hopefully which ensures that the days of exploiting publicans comes to an end and that publicans who run pubs can do so without fear of losing their livelihoods. It is time for true social justice for British publicans and the pub industry as a whole.”

Commenting, Simon Clarke, Fair Pint, said:

“The Market Rent Only option is the most simple solution, it is phased, it is self policing, the cost would be apportioned to the parties, as already provided for in the existing leases, saving the industry as a whole money, and, as referral to the Adjudicator would only be necessary in the event of failure by the parties to agree, it saves time and money.”

Clive Davenport, FSB Enterprise and Innovation Chairman, said:

“FSB research shows that nearly 90% of publicans want a market rent only option, in other words being able to buy product free-of-tie with an independently assessed fair rent. The letter to the Business Secretary sets out the practicalities of how this will work, providing more freedom for publicans and lower prices for consumers.  Our research project also demonstrated the economic boost, new jobs and training that would ensue, and we hope the Government listens and comes up with a strong statutory code that includes the market rent only option.”

Commenting Greg Mulholland, Coordinator of Fair Deal for Your Local and Chair of the All Party Parliamentary Save the Pub Group, said:

“It is clear that the obvious, simple solution to the longstanding and ongoing problem of pubco overcharging remains the BIS Select Committee solution, the market rent only option. What still does not seem to be grasped by BIS Ministers and officials is that this is also gradual and market based solution that as well as actually making the pubco tied model work as it should, would also be the least disruptive and cheapest. The Government needs to understand that the Select Committee were right and the market rent only option is not just the only solution to the pubco problem, but the only deliverable one. They must not avoid it on the basis on pubco misinformation and must do the right and commonsensical thing and introduce the market rent only option to rebalance pub profits and to make the beer tie work as it should.”

Commenting Val Spenser, Licensees Supporting Licensees, said:

“On behalf of all our members and tied licensees past, present and future the Licensees Supporting Licensees group completely endorse the principle and definition of a Market Rent Only (MRO) option. MRO presents a huge opportunity available for the current Government, where previous Governments have failed, to put financial life and social stability back into the Communities and local economies that Pubs support on a national scale. LSL implore this Government to endorse the MRO option as to be absolutely clear anything less would be seen as a failure of the consultation.  Failure would permit the continuation of the complete betrayal by Pubcos of the many hard working Licensees that we represent.  Licensees have suffered for far too many years the wholesale Pubco abuses that the present system has allowed unfettered throughout this industry. It needs to stop.”

Contact: Steve Kemp GMB on 07730 898 102 or GMB press office 07921 289880